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Tuesday, 16 October 1984
Page: 1773

Senator MacGIBBON(5.57) —I wish to speak mainly on the Customs Tariff (Coal Export Duty) Amendment Bill but before I do that I wish to refer to two matters in the other Bills that we are also debating. The first is the reduction in excise on light beer. I support that move very strongly. I regret very much that the Government could not think the matter through and get it right and that it could not see that there was no place for putting a sales tax on the ultra-light beers. By doing that it has shown that it does not recognise that it has a social responsibility. Taxation can be used not only for revenue raising purposes but also for the promotion of social ends. The Australian Labor Party is always trumpeting about how we need to take money away from those who earn it and give it to those who do not work for it in the guise of social equity and the redistribution of income. I would have thought that, with that same doctrine, it could look at the imposition of sales tax on the ultra-light beers and see how counterproductive that was.

If there is one thing we need to do it is to encourage people to drink less alcohol in their drinks. I feel very strongly about this. I make a modest claim to be reasonably experienced in the use of alcohol. I enjoy it, but it is a matter of major concern to me to go to parties or functions or to hotels and see the youth of this country drinking spirits in the way in which they drink them today. They did not do that 15 or 20 years ago.

There are many reasons why they drink spirits. One of the reasons is the fact that increases in excise on beer have inflated the price of beer to the extent that there is now not much difference between the price of a pot of beer and a glass of spirits and mix. Sure, there are social pressures as well. I think the younger generation thinks it is more sophisticated to drink rum and coke or something like that than to drink beer. Quite clearly, the advertising that has gone on, such as 'Things go better with Coke', and the way that soft drink mixes can take bland spirits like some of the rums, vodka and gin without much of a taste of alcohol coming through, leads the young drinker into not appreciating the concentration of alcohol that he or she is drinking.

People drink in the first instance for fellowship. They go to a hotel, a club or a party because they like to enjoy the company of their fellow men and women. Only alcoholics have a psychopathic need to raise the level of alcohol in their bloodstream as rapidly as possible. If we recognise that point, the thing to do is to educate the young to drink beer of low alcohol content because, above all, beer is the drink of moderation. People can certainly get intoxicated on beer, but it takes longer and it is a more gradual process than the rapid intake of spirits when their sometimes bland taste can be masked by adding mixers. I think there is a very real sociological benefit to the young drinkers in reducing the excise level on the low alcohol beers. Other speakers have referred to the case in regard to drink driving and that is equally important. I applaud the move of the Government to reduce the excise on light beers. But I think it was an act of stupidity to put a sales tax on the ultra-lights because it is socially unproductive and it places an unnecessary impost on the cost of that commodity.

The other point to which I briefly refer is the increase in excise on avgas and avtur. As Senator Rae said, it operates against the private person, the small businessman in the community and those in the rural community. This Government embarked upon taxation by stealth with its automatic six monthly increase in excise on alcoholic spirits and fuel excise payments. It is ripping off millions from the community through this taxation by stealth. Not content with that, it has gone ahead, as the Budget documents state, 'in the interests of cost recovery'. Cost recovery is not defined, but I suppose it means that the enormous deficit that the Labor Party has got us into must be reduced.

Senator Button —I beg your pardon?

Senator MacGIBBON —The enormous deficit. Is the honourable senator hard of hearing? I refer to the enormous deficit of nearly $8 billion last year and the rubbery estimate of about $7 billion for this year.

Senator Button —Where were you when your last Budget was brought down?

Senator MacGIBBON —We had a deficit of $4.5 billion. The present Government's estimate of $9 billion was a lie. If the Minister looks at the Budget Statements , he will find that we ended up with a figure of $4.5 billion which is very different from the $7.9 billion with which the Government ended up on its first attempt and the $7 billion to which it is leading us in the present Budget.

I return to the increase in the excise on avgas. On Sunday I attended the annual general meeting of an aero club of which I have been a member for nearly 20 years. It is the biggest, most successful and oldest aero club in Australia. When this year's accounts were presented, the President-I do not know his politics; I have never heard him discuss politics-made the announcement that this Government was the most unkind and severest in regard to aviation in the history of the country. He talked about the big hike in avgas that has taken place because of the increase in excise payments; the 20 per cent sales tax on the purchase of aircraft; and the 2 per cent import duties. All of these things harass the general aviation movement in particular. The general aviation movement involves the small businessman. Many people fly in their own aircraft to their agencies around the country. Many people have sales and maintenance tasks for which they find the use of an aircraft very valuable. They are being taxed out of business by the impost being put on them by this Government. Of course, the rural community, which contributes so much to the wealth of this country and which needs to cope with isolation and the need to cover great distances, is meeting the most severe penalties at the hands of this Government.

I turn to the Customs Tariff (Coal Export Duty) Amendment Bill which the Opposition supports. We will vote for the amendment to the motion for the second reading which has been moved by Senator Peter Rae. The only regret we have about it is that the Bill does not provide for the total removal of the coal export levy. There is no reason for this levy to be maintained any more. The incoming Liberal-National Party Government has given an undertaking that in the new year this levy will be removed from the entire coal industry. In 1975 the Labor Government under the then Minister, Mr Connor, imposed a $6 a tonne levy on high quality coking coal that was exported. The conditions that prevailed in the mid- 1970s were boom conditions. Unfortunately, neither Mr Connor nor any other member of the Labor Party had the education or the experience to realise that all mining operations are cyclical. They are a matter of boom and bust. There is a shortage of the commodity; prices rise; producers in the business make good profits; new producers come into the field; there is an over-supply; prices collapse; producers go out of business; and the cycle repeats itself. But Mr Connor looked at the situation and decided that there was money to be had by his Labor socialist Government and he placed the $6 a tonne export levy on the coal industry. Unfortunately, those lush times have passed. The Labor Government, with a burst of true socialism, thought that it was entitled to profits, again, through a redistribution of wealth from an investment that it did not make. It did not put one red cent into any coal mine in Australia. It was not happy with its company tax; it wanted more. So it placed this $6 a tonne levy on export coal.

In Queensland, great developments have taken place in the Bowen Basin involving at least $8 billion of capital. Eight billion dollars has been invested and not one cent of it has come from either a State or Federal government or authority. It is all private capital. The investors of that private capital have made a huge investment and they have taken the risks that are involved in all mining operations. They are sincere, professional and they are in it for the long term. Yet they were taxed at the time by the Labor Government-a tax which still applies to some sections of the industry because under the Government's socialist doctrine it felt that, having taken no risks, it was entitled to some of the profit.

The second part of Connor's move, of course, was an anti-Queensland move because he tried to shore up the inefficient underground mines in New South Wales with their featherbedding unions. The export levy applied only to Queensland mines. It did not apply to any of the New South Wales mines. Because it was a sectional tax, I have always argued that it was both unfair and unconstitutional. Its practical effect was to apply only to one or two companies engaged in coal mining in Australia. The Fraser Government promised to remove this tax and was moving progressively towards doing so. It reduced it from $6 a tonne to $4.50 and then down to $3.50. As I said earlier, in the new year we will remove it completely.

This Bill provides an exemption from the payment of the $3.50 a tonne levy for those producers who blend 15 per cent of underground coal to make a high quality coking coal for export, who have consistently followed this practice for the last 12 months from mines operating before 1 July 1980; and who mine to a depth not greater than 60 metres. The effect is to exempt two mines, but six others- all owned by one company-must pay the levy. The two mines exempted are in Queensland-the CSR Ltd Moura mine and the Thiess Dampier Mitsui mine at South Blackwater. The six mines which must still pay the levy are Goonyella, Peak Downs, Saraji, Norwich, Blackwater and Gregory. An arguable case can be made that the present production from Harrow Creek and Peak Downs, of the BHP-Utah group, should also be excluded because between 5 per cent and 9 per cent of the Harrow Creek coal is blended with the Peak Downs open cut coal to raise it to the standard required for the export market. The reasons for this Bill are that the Labor Party has been forced into it to keep the two mines at Moura and South Blackwater in production.

There is great overproduction at present on the international market, so there is competition and prices are being driven down. At the same time the mines face ever-increasing costs of production and the margin between profit and loss is getting narrower.

One side effect of the legislation is to give some support for underground mining. That is not a bad intention of the Bill because there will come a time when the easily won open cut coal will be worked out and we will have to go to underground mining and rather than develop or have to refine further the techniques at a later date it is better that that moves hand in hand with open cut mining where it is economically possible to do so.

It is very important that we keep our coal production and sales up. In 1983, $1 .7 billion was earned-10 per cent of Australia's exports-from the export of coal . In the central Queensland mines we have the most efficient coal extraction in the world and therefore we start with a price advantage from a marketing point of view. But we do have two imposts on the industry. The first is the government costs that are imposed on it and the second is the freight to our markets. We are a long way away from our export markets. We sell some coal to Europe, which is the other side of the world. Our big markets in Japan are further away from us than they are from North America. Both Canada and the United States of America are our competitors in those markets.

The Federal Government has two imposts on the coal export business. It has the export levy that we are talking about in this Bill and it has the export control system under which the coal exporters have to labour. Additionally, of course, we have the company tax which every company pays; there is no question about that. But as well as Federal imposts all mining companies bear a considerable burden of State costs. The State costs now are considerably higher than the load that is imposed on them by Federal charges. The State costs include royalties, rail freights, port charges and the whole cost of setting up the mining ventures , building the towns and the facilities for the employees of the mines to live in.

All these charges are proper and legitimate. The only question that can be raised is the scale of those charges. I guess that, as Federal parliamentarians, we have an interest because if the State government taxes the operations of a company through these levies there is not much profit left for company tax to be paid to the Federal Government. But if we start with the proposition that the Crown owns the minerals for the benefit of the community and the nation at large , it follows that the authority to prospect, the granting of mining leases and the royalty payments on productions, all flow to the States. By and large royalty payments for coal are reasonable and moderate.

The Queensland Government has chosen to make rail freight a taxing venture over and above the cost of recovery of the service involved. This has reached a very high level in Queensland. Roughly 22 per cent of the selling price of coal goes for rail freight. Put another way round, it costs twice as much to rail a tonne of coal from the mine to the port in Queensland as it does to ship it from the port to Japan. Roughly, the Queensland Government earns between $8 and $11 per tonne profit on each export tonne of coal. That goes to the State Government that really has made no investment in the system at all because all the infrastructure has been put in place by the companies. Indeed all the railway lines have been built by the companies as part of an agreement with the State Government. This ought to be pointed out from a public information point of view . More profitability from the coal mines goes to the State governments than to the Federal Government and to the shareholders. But we do not control the States , nor should we seek to do so.

I would like to turn in a little more detail to the matter of Federal Government costs. This export levy is applied to only one company-BHP-Utah with its six mines that still produce and qualify for, or are judged as having to pay , this export levy. There is no question in my mind that this Government recognises that this tax is a poor tax, an inefficient tax and an undesirable tax. One needs only to read the second reading speech of the Minister for Education and Youth Affairs (Senator Ryan) on behalf of the Minister for Industry and Commerce (Senator Button) to confirm this. I would like to quote the paragraph that refers to it. The Minister said:

The Government considers that the most desirable course is to incorporate the coal export duty into a Commonwealth-State resource rent tax package. However, we recognise that this may not be practicable in the immediate future.

That is a clear statement to me. This Government recognises that this tax has a lot of drawbacks, that it is a bad tax. I repeat part of the final sentence in that paragraph:

However, we recognise that this may not be practicable . . .

The Government is making reference to the resource rental tax in agreement with the States. The Government should have the courage to come out and say: 'We will abandon the tax'. It knows very well that it will never get agreement with the States on the resource rental tax proposition that has been put up by the Minister for Resources and Energy, Senator Walsh, which is totally discredited and no longer has any mileage in it as a negotiating document around the country . Let us recognise that this tax-

Senator Peter Rae —You mean the discredited Minister for Resources and Energy?

Senator MacGIBBON —Yes, totally discredited. This tax has no place in the argument. It can say 'we would like to move towards that position and if we can get that we will get rid of the coal export duty'. But this Government knows very well that it will never get agreement with the States on this matter.

Let us recognise the inequitable nature of this tax and do something about it. It is quite possible to phase out this tax over two or three years. The revenue forgone is not very much. It was about $60m last year, but because the company paid that $60m this Government lost around $30m in company tax. So the net loss if the tax is phased out is roughly 50 per cent of what the Government is getting.

The second big impost on the coal mining industry, from an export point of view , is the export control system. In effect, it is a price surveillance authority where this Labor Government is trying to set a minimum price for coal. This will have two effects. First of all, there is a very big administrative cost on any coal exported. Companies have to send people backwards and forwards all around the world, conducting negotiations which could be done at far less cost, far more efficiently and with far greater speed if they were not tied to the apron strings of a Labor government saying: 'Please, sir, can we accept this price per tonne of coal from this buyer?' It also reduces the negotiating ability of the company with the overseas purchasers because they are not in a position to be able to close a deal on the spot. They are denied any flexibility. In any commercial agreement, when one is negotiating on price and contract terms, a company wants the maximum degree of flexibility. Although there is no legislation in place requiring a minimum price, the Labor Government has made it very clear to all the Queensland coal exporters that, if they do not toe the line on what this Government thinks is a minimum price, they will not be able to get their mineral export permits and therefore they will not be able to export their product. That is a very effective weapon to hold over the head of any coal exporter.

The point is that the Australian Labor Party cannot understand the market and it cannot trust the companies to negotiate. The companies know the market; that is their livelihood. They want the best return for themselves and they want it for their shareholders. Unlike public servants and Ministers, they are under pressure from shareholders who are hungry for a maximum return. They know what the market will bear. It should be a matter that is left to their own commercial judgment. In Australia today no company exporting coal will willingly sell for less than the best price it can get. These people are businessmen and that is what they are about. It is absolutely nonsensical for this Government to say: ' Unless we set a minimal price you will sell us out and sell out the Australian people'. It is absolute nonsense and it just shows that the Labor Party does not understand the commercial world.

Before I close I would like to talk briefly about the future for the coal industry. At present it has an important place in Australia's export earnings and, therefore, in relation to our standard of living. Coal will continue to have an important place in the foreseeable future. The coal market is very competitive and very tough. There are many producers in the market at present and more are coming on. Nearly all those producers are closer to markets than Australia. So the pressure is on Australia unrelentingly to market its coal as cheaply as it can-to get it out of the ground, onto the ships and into the markets where it is required at the most competitive rate possible.

Canada alone is coming into production at a rate which will be roughly half of the whole of Australia's current export. In the next few years that country will have the ability to market between 40 million and 50 million tonnes of coal a year, and most of that will be directed towards the markets in which we sell our coal. Japan, of course, is our big market, but Japan itself is in the business of diversifying its suppliers of coal for security reasons. Of course, Japan is moving away from high power-consuming basic industries into higher technology, which demands less raw electrical energy than has existed in the past.

Coal faces some pretty formidable environmental problems. Acid rain has been getting an increasing amount of publicity, and the Northern Hemisphere faces great danger from it. Sulphides are exhausted into the atmosphere through the burning of coal. An acidic solution is formed which then precipitates in the form of acid rain. I was reading the other day that the whole of the Black Forest appears to be dying off. The steel industry is a big user of coal. Of course, at the present time, with the downturn in economic performance around the world and the low production of steel, the demand for coking coal is down and looks to be down for some years ahead. The movement to nuclear power, which will accelerate in future years as acid rain and other pollution problems from coal burning continue, will result in a decrease in the demand for steaming coal .

Be that as it may, there will be good markets for coal in the years ahead. Australia needs to maintain and increase its market share because the export of coal is very important to us. I hope we do not face a situation in this country where the Labor Party gives away our coal markets in the way it has given away our beef markets and has tried to give away our sugar markets. Private industry has made the Australian coal exporting trade, and this trade has benefited the Australian community enormously. Private industry has responded magnificently to opening up these fields, developing the markets and delivering the product. I welcome this legislation because it winds back an impost that the Government imposed on that magnificent effort.